COLUMN-UK financial regulator gets first big scalp: John Kemp

May 18, 2010

— John Kemp is a Reuters columnist. The views expressed are his own —

By John Kemp

LONDON, May 18 (Reuters) – The UK Financial Services Authority’s (FSA) efforts to clean up the City of London have often seemed to owe a debt to Monty Python’s ineffectual Spanish Inquisition.

Until now, the round-up has been confined to a list of clueless bit players and departed has-beens, all marginal to the industry. It has inspired irritation more than fear or the determination to reform.

So today’s settlement with Johnny Cameron, former head of RBS Global Markets, effectively banning him from the industry except in a consulting capacity, marks something of a landmark for Britain’s famously ineffective market regulator.

It is the first acknowledgement that problems revealed during the last three years cannot be blamed on a few low-level bad apples.

The incentive structures that encouraged excessive risk-taking, unethical behaviour and the sale of hopelessly misconceived financial products with little “social value” stemmed from the poor leadership and tone set right at the top.

Efforts to turn around the City’s culture to re-emphasise personal responsibility and put the customer at the centre of transactions (“dictum meum pactum” – My word is my bond) need to start with senior management.

There is inevitably an element of rough justice and scapegoating in targeting high-profile individuals with the benefit of hindsight. But in a system that relies on regulation rather than the threat of bankruptcy and personal ruin to discipline risk-taking, it is indispensable.

Holding Cameron to account is a good start. But if the FSA really wants to get its point across, it must still find a serving manager or business unit at one of the big names in the City.

So far, there is a sense that small-fry employees and principals at fringe firms have been held to a higher standard of accountability than the leaders and the big names.

The day a serving business leader or big institution is sanctioned for acting contrary to the interests of customers or market abuse will be the day the world knows London has finally changed.

(The author worked briefly for RBS before joining Reuters in 2008) (Editing by Will Waterman) ((; Reuters Messaging:; +44 207 542 9726))day, 18 May 2010 07:10:27RTRS [nLDE64H10D] {C}ENDS

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